Deficit plan would snip into Social Security

WASHINGTON - The leaders of a bipartisan budget deficit commission launched a daring assault on mushrooming federal deficits on Wednesday, proposing reducing annual cost-of-living increases for Social Security, gradually raising the retirement age to 69 and taking aim at popular tax breaks such as the mortgage interest deduction.

As part of a proposal to wrestle $1-trillion-plus deficits under control, their plan would also curb the growth of Medicare. It came a week after voters put Republicans back in charge of the House and told Washington that the government is too big.

However, the plan put forward by commission chairmen Erskine Bowles and former Republican Sen. Alan Simpson, doesn't appear to have support from 14 commission members that is needed to force a debate in Congress. Bowles is a Democrat and was former President Bill Clinton's White House chief of staff. Simpson is a Wyoming Republican.

The Social Security proposal would change the inflation measurement used to calculate cost-of-living adjustments for program benefits, reducing annual increases. It will almost certainly draw opposition from advocates for seniors, who are already upset that there will be no increase for 2011, the second straight year without a raise.

The plan would also raise the regular Social Security retirement age to 68 in about 2050 and to 69 in 2075. The full retirement age for those retiring now is 66. For those born in 1960 or after, the full retirement age is now 67.

Also taking a hit under the proposal is better-off beneficiaries who would receive smaller Social Security payments.

The commission is supposed to report a deficit-cutting plan on Dec. 1, but panel members are unsure at best whether they'll be able to agree on anything approaching Obama's goal of cutting the deficit to about 3 percent of the size of the gross domestic product.

Building the needed support of 14 of its 18 members will be difficult. Conservative Republicans, many of whom rode into office recently on small-government and deficit reducing promises, are having difficulty with the options suggestions for raising taxes and cuts in farm subsidies, foreign aid and the Pentagon's budget. Cuts to Social Security and Medicare are making some liberals on the panel recoil.

"This is not a proposal I could support," said panel member Rep. Jan Schakowsky (D-Ill.) "On Medicare and Social Security in particular, there are proposals that I could not support."

Other proposals by Bowles and Simpson include increasing the gas tax by 15 cents a gallon to fund transportation programs. They also are proposing a fundamental rewrite of the tax code, although no specific plan was offered.

They did not specifically call for eliminating or scaling back the popular mortgage tax deduction, but suggested such an option be seriously considered.

The plan released by Bowles and Simpson is only a proposal. Budget deficit commission members will resume debate on it later Wednesday and next week in a long-shot bid to reach a compromise.

The release of the proposal comes just a week after midterm elections that gave Republicans the House majority and increased their numbers in the Senate. During the campaign, neither political party talked of spending cuts of the magnitude proposed by Bowles, with Republicans simply proposing $100 million in cuts to domestic programs passed each year by Congress.

"It's a very provocative proposal," said a Republican member of the deficit commission, Rep. Jeb Hensarling of Texas. "Some of it I like. Some of it disturbs me. And some of it I've got to study."

While it may not survive, the Bowles-Simpson proposal illustrates the painful choices involved in tackling a deficit that presently requires the government to borrow 37 cents out of every dollar it spends.

Even with the dramatic proposals, the Bowles-Simpson plan would leave deficits of about $300 billion in 2015, the year by which Obama tasked the group with balancing the federal budget, except for interest payments on a national debt that now stands at $13.7 trillion. If the changes to Social Security are dropped, the deficit would be about $400 billion in 2015.

But the plan is an aggressive assault on the longer-term deficit crisis, which is fueled by spiraling costs for retirement programs.

Simpson and Bowles acknowledged the political unpopularity of their proposals.

"We'll both be in a witness protection program when this is all over, so look us up," Simpson told reporters.

"We're not asking anybody to vote for this plan. This is a starting point," Bowles said.